In The Coming Recession, Will Beer Be The Affordable Luxury?

With a reported one million empty homes built in the US on speculation with another million sub-prime mortgages timed to fail this year, there is a lot of discussion this Yule on the economic prospects for 2008. I once advised small firms and in my planning advice I always included the need to be recession proof. For the most part these were weird words to young IT entrepreneurs in the late 90's as they had really never experienced the sorts of cycles that last hit around 1992. It is still pretty much the same in Canada given how much better we weathered the post-9/11 slump and how now our oil is worth so much more than it costs to get out of the ground.

But there is a good chance this long economic run is going to fade and fade rather fast giving even more reason to plan. And plan you can as I learned once from a undergrad classmate telling us how the family got rich in a recession - bubble gum sales. The ancient head of that family saw the early 1930's coming and realized that people would still be buying something, it was just that they would be buying something less expensive. Sure there were the necessities in life but plenty of folk still bought the affordable luxuries and so many bought their gum that, half a century later, a third generation was still living off the rewards of that one decision.

So what does this mean for beer? Brewers may have to make some decisions in 2008 and one they may want to make is to ensure they have let their customers know what great values for great tasting beers are out there amongst their brands. This may mean, for example, that Samuel Adams needs to play down Utopia in favour of their simpler but solid Scotch Ale or that Stone focuses more on their IPA rather than their next experimental Double Diablo IIPA (smoked style, macerated on olives) Bastardly Brew. But it also means that they can keep their machines operating as other parts of the economy go idle.

The time may be ripe for other reasons, too, given the price hikes for hops and barley as well as the fatigue around the extreme that is starting to pop up on the radar. Firms with long-term cost-saving green infrastructures, too, may do well. Forecasting is often a mug's game but those brewers who put their fingers on the right price point for a lighter flavourful craft ale may be able to ride out what may hammer those who parked too much capital or, worse, dipped into debt to create that perfect thirty dollar art beer. Affordable luxury may be the message we want to hear in 2008.

Maureen Ogle said this about the book: "... immensely readable, sometimes slightly surreal rumination on beer in general and craft beer in particular. Funny, witty, but most important: Smart. The beer geeks will likely get all cranky about it, but Alan and Max are the masters of cranky..."

Ron Pattinson said: "I'm in a rather odd situation. Because I appear in the book. A fictional version of me. It's a weird feeling."

Comments

Affordable luxury, indeed. I think that beer has a better chance than other products to weather the storm, but I've got a feeling that the larger industrial brewers are definitely hedging their bets in the event of a recession. By consolidating their brands, they can supply the niche market and the crowd that enjoys the ever-popular macro lager. By the same token, I'm sure the smallest brewers will be feeling the squeeze over the next few years.

On the converse, I wonder if scarcity will create even more allure for certain beers that otherwise wouldn't be as exalted. Lots of questions and things to watch for next year. Good post!

You've made a lot of good points - and yes, people will probably never stop buying beer (actually, it might be argued that people are more likely to drink during a recession, but that probably doesn't have an effect on the craft beer market).

Beer is still a pretty affordable luxury, though, especially when compared with wine and other forms of alcohol - after all, it is not that expensive to "trade up" to a better beer.

Most big brewers have deep pockets and despite the high raw material costs I suspect we'll see some very deep discounting from them. Not sure what will happen to the small boys, but it's the medium sized brewers I fear for - expect to see some of them go to the wall/get swallowed up and closed down.

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I have moved the content of the OCB Commentary Wiki here. It is now a static document and pretty much is locked in as understandings existed as of 2012. Probably needs its own wiki to update the content! Below are the original introductory remarks:

"The purpose of this wiki is to collectively make comments, add annotation, identify errata and suggest further sources to the text of The Oxford Companion to Beer. Members are asked to avoid comment about the authors, the structure of the text or other extraneous matters. This wiki is a not for profit project that reviews the text pursuant to the concept of "fair dealing for the purpose of criticism or review" under Canadian copyright law." Alan McLeod, wiki Organizer, and chief bottle washer at A Good Beer Blog. Motto? "Many hands make pleasant work." Alan McLeod, 25 October 2011. Please provide some information about yourself when making a request to join the wiki. Anonymous requests for membership will not be approved. Overly ardent and rudely put claims to authority will be cause for removal from the membership. As of 11 January 2012, 134 entries or 12.2% of the total of 1,100 received commentary, many with multiple comments. Eight of the photos have been corrected as well. That number rose to 151 by 13 May 2012.